In many (most) cases, the health system CFO is the Final Boss
Chief financial officers (CFOs) are probably the most sought-after executive at health systems. Well, any organization really. But given the slender margins on which most hospitals and health systems operate, they have inordinate power over the purse strings, meaning the CFO is usually the Final Boss in getting any significant expenditure approved. Ergo, their calendars are filled with meetings from both internal staffers and external vendors. So if you regularly need to engage with a health system CFO, this is the guide for you.
(And if you'd like to learn more about what's behind this guide, or learn more about these CFO personas, email us at info@unionhealthcareinsight.com and we'll schedule some time to chat.)
Health system CFOs do share some traits in common
Some characteristics nearly all CFOs (health system or otherwise) have in common: They usually possess a bottom-line focus (let’s hope so), are rarely people-pleasers, and strongly value hierarchy and chain of command, meaning it's unwise to try and do an end-run directly to the CEO or board.
But those commonalities hide a great diversity of both the incentives under which healthcare CFOs operate, and the kinds of people who tend to occupy the role. Below, I’ve outlined five “CFO personas.” The differentiating characteristics can roughly be traced to the size and type of organization, intensity of its capital needs, relative austerity of its budget, and ambition of the person holding the job. The following are organized generally by the size of the health system in question, though that is not a hard and fast rule.
OK, not everyone fits into these boxes
A caveat: Do not come at me on LinkedIn if you're a health system CFO and you don't feel like you fit into the typology below. I imagine few actual humans would. This isn't a Myers-Briggs personality test, nor are these healthcare CFO traits meant to be mutually exclusive. There are plenty of major-system CFOs that are in-the-weeds deep on revenue cycle, and some standalone-hospital CFOs with tremendous glad-handing political talent (they should probably get that checked out). Most talented executives will have elements of all of these types.
But for those of us in the industry who work with health system CFOs on a regular basis, this can be a helpful general guide as to what traits tend to make CFOs successful in various contexts.
As for the methodology? I'll be honest: our experience. The Union staff has been working directly with these professionals for the entirety of our careers, and this is a synthesis of those experiences.
Got all that? Let's begin:
Meet the health system CFO personas
Health system CFO persona #1: The Rising Star or CEO Understudy
This is the most common CFO role at major health systems. The CFO position is often the stepping stone to the CEO role, but at major health systems (>$1B in revenue), CFOs not only control system budgets and secure capital (more on that below), they increasingly take roles in dealing with high-revenue physicians and medical groups, take an active role in donor management, and oversee an army of investment managers (roughly half of big systems’ excess margin comes from investments and philanthropy). These are absolutely the most difficult executives to get a meeting with anywhere in the health system (including the CEO). Events focused on such executives are typically only successful if they also include the CEO and board chairs. These executives actually have less day-to-day involvement in system finance operations than one would think—mostly because they have an array of financial experts and junior executives to manage every aspect of financial management, including budget (VP finance), revenue cycle (VP rev cycle), philanthropy (chief development officer), etc. Most of what they do each day is accurately communicate the health of system finances, hold financial leadership accountable, and audition for the role of CEO when it (or another’s system’s CEO role) vacates. They often are great with names, sharp with the 30-second pitch, and disciplined about staying on-message.
Health system CFO personal #2: The Wall Street Insider
Systems that regularly find themselves neck-deep in the capital markets typically have CFOs with deep ties to the financial services industry, and these CFOs are usually the single most powerful executive at the organization (sometimes even more so than the CEO). If the system is growing quickly via acquisition or greenfield development, investing heavily in non-patient-care services (think innovation incubators), or expanding into non-adjacent markets, chances are that it’s also securing billions in tax-exempt debt. This is especially true for any org that has large tranches of bonds up for refinancing, or one that is struggling to integrate assets from major mergers (to be honest, that’s true for most major system mergers). These are often the execs given the podium at the JPMorgan conference. Like the CEO Understudy, they also have an army of junior executives to manage operations, but are often a bit less-focused on enforcing budget or performance accountability, simply because their expertise and connections are in the capital markets. They’re also usually on the lookout for other financial insiders—or at least those people who know their world. Using the right jargon and lexicon is important here (e.g., “25 basis points” is better than saying “a quarter-point” when it comes to interest rate changes, and definitely don't say “0.25%”).
Health system CFO persona #3: The Executive Manager
This is the rarest form of health system CFO, but it’s most common in highly decentralized systems that act more as holding companies rather than as a system with integrated financial operations. Such organizations usually delegate most financial operations to their regional CFOs, and often are responsible for collecting the “system tax” or distributing centralized funds as needed. While most CFOs of decentralized systems have risen through the internal ranks to ascend to their position, it’s not necessarily a requirement. The main job is to corral the other system leaders into consensus—which is a very different skill set, more akin to a CEO, COO, or CSO. So at these organizations, you’ll find system CFOs who are exceptionally competent “leaders of leaders” but whose depth of knowledge may not be as great as in some of the other personas. These executives will be more focused on management, system governance, and ensuring that each of his or her division chiefs is rowing in the same direction. Such CFOs often come across as warm, amiable, and unintimidating. And they actually are, but they are also politically savvy and difficult to read at first.
Health system CFO persona #4: The No-Nonsense System Enforcer
This the most common CFO that most orgs looking to sell products/services to health systems will actually encounter. They often take the role of regional CFO within a major system, or are the head of finance for mid-size regional systems. They often have final say over any purchase over $25k, and almost always have the reputation as the person who has to say no to people. Unlike the personas above, this executive will not gladhand you, nor will he or she be swayed by pitches that do not have a straightforward means of measuring ROI, though that doesn't mean they are swayed by quantitative analysis alone. Qualitative ROI is acceptable, but it must be obvious. In general, such CFOs are no-nonsense, and are often quite terrifying to junior sales staff. They appreciate genuine candor, are skeptical about grandiose claims on almost any topic, and have a keen ear for artifice—so charm will only go so far with them. They’re also looking for other execs who understand their world, but will rarely expect anyone to truly understand the ins and outs of health system financial operations, because they are well-aware of how idiosyncratic they are. They often come with a dark, wry sense of humor. I love these guys and gals. Seat them next to me at dinner.
Health system CFO persona #5: The Efficient Financial Operator
This is the most common CFO you will see at small or midsize regional systems or small to mid-size standalone hospitals. Finances here are far less complex than for major systems, mostly because the orgs are usually not large enough to warrant a credit rating from a major agency, and so financing options are narrower. Such CFOs are often deep in the weeds on monthly performance, and will be deeply involved in revenue cycle operations. They are the whips of the organization, meaning that a call from them is rarely good news if you work with them. The good news is that they often have very specific challenges and have quite detailed knowledge about where they do and do not need help. Companies that can help address their three to five specific challenges are generally well-positioned. I often find that such leaders often feel rather beset by a barrage of constant demands and the need to regularly say no to things. These CFOs also have the most inflexible schedules. Last week of the month, last two weeks of the quarter, and the six weeks leading up to the end of the fiscal year are typically no-go times for them because they’re in either budgeting or reporting season. Outside of those periods, their days are quite likely to be taken up with revenue cycle challenges.
Beyond 'who is' the health system CFO: Let's talk healthcare ROI
Whether you're preparing to talk with the health system CFO, or you are the health system CFO, the key next set of questions is always about clarifying the ROI of different strategic and operational choices. Answering these questions requires strong understanding of the economics and other moving pieces of (all) the domains in question. Need help thinking all that through? That's in our wheelhouse! Reach out to info@unionhealthcareinsight.com to set up time to talk about how Union can help.